Vijay Marolia
February 08, 2016

Why we're long Smith & Wesson (SWHC) in just 3 Slides

America is and will remain, locked & loaded--Smith & Wesson has the brand recognition of an American cultural icon...With leading market share and growing profits, shares of SWHC continue to present solid long term value.
February 2016
Regal Point Capital Management, LLC
RPC’s
Quick & Easy
on
Smith & Wesson Holding Corp.
All You Need to Know in 3 Slides
The Background
:
Is
Fear
Selling Guns?
February 2016
2
Regal Point Capital Management, LLC
UGLY TRUTH:
There were
more mass shootings
in the
U.S. in 2015
than there were days in the year.*
Gun sales in the US are skyrocketing.
In the past eight years,
the number of people who own
firearms has nearly
doubled
In 2015, a record setting
23.1 million
people applied
for background checks.
Black Friday 2015 set a
single day record
for
applications.
Since Obama took office in 2009,
shares of SWHC
increased more than 740%
,
far surpassing S&P 500
(up 110%) and outperforming Apple (up 628%)
*Our hearts go out to anyone who has been a victim of or affected by gun violence. RPC does not condone violence of any kind
.
4Q14
Disappointing Quarter
SWHC: ~$9.50
Bulls
vs
Bears
February 2016
3
Regal Point Capital Management, LLC
BULLISH BULLETS
Gun Sales Soar
as Obama Announces Gun Rules
Impressive
ROE over 30%
Strong Momentum and Sector Leader
Recently
raised Q3 and FY earnings and revenue guidance
(Jan 4th, 2016)
Gross margins up to 39% in 4Q15
Acquisition of
Battenfeld
Technologies
(BTI)
just the start of
plans to expand
into the
$60B sporting goods industry
BEARISH BULLETS
Opposition from
Obama Administration
NY public advocate, Letitia James, asks for SEC
investigation
Disappointing rifle sales
Has the
stock rallied
too far?
Potential for
political pressure
to lead to institutional buying
boycott.
Charlton Heston
(NRA Spokesman)
Latitia James
(NY Public Advocate)
RPC Thesis
“A free people ought not only to be armed, but disciplined...”
~
George Washington
February 2016
4
Regal Point Capital Management, LLC
RPC
is
long
1
Smith & Wesson Holding Corp.
for
the following reasons:
Obama’s plan
will not negatively impact SWHC’s business model.
Strong returns on capital
,
improving margins
, and
amazing demand
for
firearms show that SWHC’s best days may still be ahead of it.
Expansion into accessories
should diversify and grow future revenues
.
Tight capital structure and shareholder friendly management with skin in the
game
THE BOTTOM LINE
America is and will remain,
locked & loaded
--
Smith & Wesson
has the
brand recognition
of an
American
cultural
icon
...With
leading
market share
and
growing profits, shares of SWHC
continue to present solid long term value.
America’s foundation
is based upon its strong
Constitution,
and the almost sacred support of
gun ownership
by many Americans shows
no signs of slowing
. Indeed, events like the recent
armed takeover of a federal office in Oregon illustrates what Americans are willing to do in
order to defend the Constitution and the rights therein.
1
RPC substantially reduced its position in early 2015 for technical reasons
--
current long exposure less than 2% of AUM
Disclaimer
February 2016
5
Regal Point Capital Management, LLC
THIS IS NOT AN OFFERING OR THE SOLICITATION OF AN OFFER TO PURCHASE AN INTEREST IN RPC REAL
INCOME FUND, LP. (THE “FUND”).
ANY SUCH OFFER OR SOLICITATION WILL ONLY BE MADE TO QUALIFIED
INVESTORS
BY
MEANS
OF
A
CONFIDENTIAL
PRIVATE
PLACEMENT
MEMORANDUM
AND
ONLY
IN
THOSE
JURISDICTIONS WHERE PERMITTED BY LAW.
AN
INVESTMENT IN THE
FUND
IS
SPECULATIVE
AND
INVOLVES A HIGH
DEGREE
OF
RISK.
OPPORTUNITIES
FOR WITHDRAWAL, REDEMPTION AND TRANSFERABILITY OF INTERESTS ARE RESTRICTED, SO INVESTORS
MAY
NOT
HAVE
ACCESS
TO
CAPITAL
WHEN
IT
IS
NEEDED.
THERE
IS
NO
SECONDARY
MARKET
FOR
THE
INTERESTS AND NONE IS EXPECTED TO DEVELOP.
THE FEES AND EXPENSES CHARGED IN CONNECTION WITH THIS INVESTMENT MAY BE HIGHER THAN THE FEES
AND EXPENSES OF OTHER INVESTMENT ALTERNATIVES AND MAY OFFSET PROFITS.
NO ASSURANCE CAN BE
GIVEN THAT THE INVESTMENT OBJECTIVE WILL BE ACHIEVED OR THAT AN INVESTOR WILL RECEIVE A RETURN OF
ALL OR PART OF HIS OR HER INVESTMENT. INVESTMENT RESULTS MAY VARY SUBSTANTIALLY OVER ANY GIVEN
TIME PERIOD.
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